The cost of powering infrastructure is perhaps the biggest bugbear of every telecoms provider. Green energy is an attractive alternative as it provides huge savings on fuel – but the actual practicalities of installation and maintenance often deter operators.
DT editor James Barton spoke to Nick Blitterswyk, of green infrastructure specialist Urban Green Energy, about the misconceptions over the cost of green energy and the advantages that it offers to operators.
DT: In terms of implementing new solutions, a major issue for clients is CAPEX vs. OPEX vs. RESCO – how are providers looking to lower costs each area?
NB: We hear so often about the growing prominence of telecoms networks in developing countries, but what we don’t hear about is just how challenging it is to get reliable and affordable energy to these sites. Grids are either unreliable or just unavailable, and even if it were available the cost of extending the grid to the site can be extremely costly. Diesel infrastructure is now being deployed at over 75,000 new off grid sites every year. These sites are costly, unreliable, unpredictable, and labour intensive - high OPEX.
Most of the equipment at a cell site, from repeaters to air conditioners, is energy intensive, and it is this energy - and the ancillary costs associated with fuelling and maintaining the energy equipment - that is so costly for operators and tower owners. Deploying new infrastructure to reduce the cost of these sites is capital intensive - high CAPEX.
The energy problem is exacerbated by the fact that expensive remote sites serve fewer customers, bringing down average revenue per user (ARPU), which is a key metric operators use to guide their investment decisions.
As operators push for higher market penetration into less developed regions, the challenge of balancing CAPEX and OPEX is critical. Trying both to lower operating expense and minimise capital expenses, while common goals for a company, are nearly impossible to meet simultaneously.
This has led to the emergence of a third option: the energy service company, often referred to as an “ESCO”. Under the ESCO model, MNOs or tower owners sign agreements with an energy service company to pay a fixed cost for their energy. For a contract period - often around ten years - the company buys energy at a predetermined rate, and receives the dual benefit of predictable, lower OPEX and minimal CAPEX. At UGE, we call this the LEA - Levelised Energy Agreement, part of our Levelised Energy Agreement Program (LEAP) that offers MNOs and tower owners a flat monthly payment solution for their energy needs.
Regardless of the choice the tower owner makes, proper analysis needs to be conducted to understand how the cost structure will play out over time. What we are finding is that the energy service model, often centred around on-site solar and wind energy, can provide significant cost savings and performance enhancements to the tower owner.
DT: It’s obviously going to be difficult to strike a balance between the three – the key motivation for providers is not to use green energy per se, but to end their reliance on diesel generators. While green energy is in many cases a cheaper, low-maintenance alternative, can current energy solutions provide enough of a saving to win over operators?
NB: That’s correct. What we find, time and again, is that companies would love to adopt renewable energy but don’t want to pay any more than they are currently paying to do so. Seen another way, what these companies are saying is “give me the cheapest source of energy.” That is unfortunate in a world being affected by climate change, but what we’ve done is focus first and foremost on providing cheaper, more reliable energy that just happens to be sustainable as well.
Today, the industry status quo is fossil fuels, and for remote sites where the grid is unreliable or unavailable, this means diesel generators. Mention the word “diesel” to an operator and you can almost see the weight building on their shoulders. The cost of the fuel itself is one consideration, and the primary cost driver is the delivery (and theft) of the fuel and the maintenance of the generators. We heard a story from one customer who was working with a fuel delivery company that was pumping half the diesel they were charging for! Powering sites with diesel is not just dirty; it’s expensive and fraught with numerous other supply issues as well.
Winning over operators is simply a matter of presenting them with a better way to get energy. With a financed approach to renewable energy systems we can literally offer customers savings from Day One, with no capital investment on their part.
DT: Could you explain a little about ‘Monte Carlo’ modelling, and how this is used to ensure reliability?
NB: Every single site is different - each has different power needs and different energy resources available. Even within a few kilometres of each other, two towers are going to have significant differences. So it is absolutely critically important to understand to a very granular detail how a site will perform over time. It’s not as simple as thinking that oversizing a system by a certain percentage is going to ensure power stays on. Instead, it’s necessary to model out the site over its lifetime, using a stochastic modelling process (such as Monte Carlo), to analyze how each variable is going to interact with each other over time.
Essentially, for each site we’re looking at every variable, modelling it over the life of the site thousands of times, and looking for those very few times where there isn’t enough energy for the site, and adjusting the system configuration to eliminate them. Our customers demand reliability, with power always on except for a small fraction of a percentage of the time. They also demand affordability, meaning the system needs to be optimized to have just enough energy supply to meet this demand, whereas oversizing the system would mean higher cost. We’re using these modelling tools to bridge the gap between reliability and affordability, creating an unparalleled understanding of how these sites work.
DT: Installation and maintenance costs are a major factor for operators when choosing solutions. Energy solutions built for remote areas are often designed to be installed by anyone, but this is not always possible. How can projects that require specialist installation be delivered in a cost-effective manner? Is the overall saving enough to offset any implementation costs?
NB: Training is important for installation, operation, and maintenance of any energy system. For conventional grid connected or diesel powered energy systems, the cost typically lies with the operator, where, as you mentioned, they are responsible for the tasks of sourcing reliable installation and maintenance.
By partnering directly with this same network of trained and qualified installers, typically system integrators, we can provide the training and oversight necessary to deliver a flawless installation of the renewable energy system. To the tower owner, all of this cost is included, providing a lower cost energy solution than the status quo. Working in these developing countries this is one of the bigger challenges companies face, but it’s also one that is within our core area of expertise, built from past experience working around the world with other enterprise sectors. Developing mutually beneficial relationships with other companies is key to our business model and one of the most rewarding components as well.